Samsung Electronics is poised for a record-breaking second quarter, with estimates indicating a staggering 15-fold increase in operating profit. The surge is attributed to the artificial intelligence (AI) boom, which has driven up semiconductor prices and fueled a resurgence in demand.
The South Korean tech giant expects to report an operating profit of 10.4 trillion won ($7.54 billion) for the April-June period, a significant jump from 670 billion won a year ago. This figure eclipses the 8.8 trillion won LSEG SmartEstimate and marks the company’s most profitable quarter since the third quarter of 2022.
The positive performance is driven by a combination of factors:
- AI-Driven Demand: The demand for high-end DRAM chips, particularly HBM (High Bandwidth Memory) chips used in AI chipsets, data center servers, and AI-powered devices, has soared. This has resulted in a price surge for these chips, contributing significantly to Samsung’s earnings.
- Inventory Reversal: Samsung’s previous inventory writedowns have been reversed as the value of its chip inventory has rebounded.
- Legacy Chip Recovery: While demand for older, legacy chips remains relatively weak, analysts suggest that a stronger recovery in this segment could signal a sustained chip industry rebound.
However, despite the positive outlook, challenges remain:
- Slowing Memory Price Growth: TrendForce, a data provider, forecasts a slower price increase for conventional DRAM and NAND Flash chips in the third quarter. This suggests a potential slowdown in the memory chip market.
- HBM Competition: Samsung faces stiff competition from rival SK Hynix in supplying high-end HBM chips to customers like Nvidia.
- HBM Approval Pending: Samsung’s latest fourth-generation HBM chips are awaiting approval from Nvidia, as earlier tests failed due to heat and power consumption issues.
The company’s strong Q2 results highlight the significant impact of the AI boom on the semiconductor industry. However, Samsung will need to navigate potential price fluctuations in the memory chip market and maintain its competitive edge in the HBM sector to sustain its growth trajectory.